TRANSPORTATION FOR WELFARE AND GROWTH IN DEVELOPING COUNTRIES

INVESTING, EXPANDING, AND INNOVATING IN THE INDUSTRY

INVESTING IN TRANSPORT IN EMERGING MARKETS

TRANSPORTATION EQUIPMENT: Improving the ow of goods and mobility of people in emerging market countries Transferring technological and managerial know-how Creating skilled jobs
Since the 1960s, IFC has invested $1.3 billion in 70 transportation equipment companies in 23 countries. Investments in the automotive and other transportation equipment sectors create opportunities and help reduce poverty by enhancing the ow of goods and the mobility of people, improving business opportunities, and raising standards of living and quality of life in emerging markets. IFCs investments are creating jobs, building markets, advancing technology, and transferring managerial know-how. We play a critical global leadership role by ensuring that all of our projects set a strong example of environmental and social stewardship. What We Offer
As the largest multilateral source of loans and equity nance for private enterprises in emerging markets, IFC, a member of the World Bank Group, brings the strength of our own $14 billion net worth, global focus, local presence, and industry expertise to bear for our clients. We offer: Tailored solutions that respond to client needs: long-term debt, quasi-equity, and equity nancing products; local currency nancing, and tenures of up to 12 years. IFC Advisory Services offer retail and country expertise across multiple subsectors, support efciencies in nancial restructuring. Track record of commitments that span the globe: the transportation and equipment sector portfolio includes 30 investments in 20 companies and nine countries. Leadership in sustainability: we are addressing climate change related to CO2 emissions and other greenhouse gases, and we help increase the recycling of materials used in manufacturing of transportation equipment.

Development and Economic Impact

As a development institution, with a mission to promote private enterprise growth and job creation in the developing world, IFC helps clients understand the business case for social and environmental responsibility: lower costs, reduced political risk, increased productivity, and brand enhancement. IFCs transportation projects have created: Over 67,000 direct manufacturing jobs, plus thousands of indirect jobs in related service industries such as maintenance, gas stations, auto nance, and insurance Signicant contributions to economic growth through revenue generated by the sector and indirectly through better access to goods, services, and markets Managerial and technological know-how, contributing to growth of manufacturing in emerging market countries Improved corporate governance and higher environmental, technical, and safety standards, with emphasis on energy efciency, climate change, and cleaner production Strong foreign exchange earnings Enhanced supply chain management

INVESTING IN TRANSPORT IN EMERGING MARKETS

EXPERTISE ACROSS THE SUBSECTORS IFCs sectoral expertise, regional knowledge, and leadership in sustainability offer signicant value to our clients, in addition to the full range of nancial products we offer.
Our industry knowledge spans the range of production, from component manufacturing to vehicle assembly and distribution. Our expertise extends from the automotive sector to rail and air transportation equipment and components, shipyards, and selective automotive consumer services such as eet management, car rentals, and consumer nancing. Long-term partnerships with industry leaders
Successful companies tend to grow in stages: it is not simply a matter of a one-time capital need or acquisition requiring a single nancing transaction. Instead, strong companies need nancial partners committed to establishing longer-term relationships. IFC is a trusted partner: a strategic advisor with nancial stability, deep pockets, and presence in the global marketplace, as well as the expertise to provide guidance on future directions based on a thorough understanding of industry trends and the companys past and current situation.

Fras-Le and Randon Group: Multiple nancing rounds in support of a local player
Brazil has emerged as a burgeoning cluster for the automotive industry, causing automotive suppliers to set up shop as well. Fras-Le is a components company that has grown as the overall automotive industry has expanded. A majority-owned subsidiary of the Randon Group, it is Brazils largest manufacturer of friction materials, producing brake pads, brake linings, blocks, and clutch facings for trucks, buses, and automobiles. In 2002, Fras-Les products became 100 percent asbestos-free.

The company holds a dominant position in the domestic after-market, and is a growing presence on the international scene as well, exporting primarily to Argentina, the United States, and Europe. Several rounds of IFC nancing, including equity and debt packages, have been supporting the growth of this strong local player for the past decade helping Brazil strengthen its position as a destination of choice for the automotive industry. IFC also supports the ambitious growth plans of Fras-Les parent company, Randon Group, which manufactures trailers and semi-trailers for trucks and rail transportation.

IFCs role:
Multiple rounds of long-term nancing for Fras-Le and Randon, totaling $65 millions Reduction in foreign exchange exposure risk Advice on process improvements to reduce air and water efuents, improve product quality, and achieve cost savings Enhancement of the countrys competitiveness: support for a strong local player reduces automotive manufacturers reliance on imports of components

BUSES: A FIRST STEP TO INDIVIDUAL MOBILITY

Studies have shown that isolation and the lack of affordable transportation options contribute to a host of social illspoverty, bad health, poor attendance in school, and a shortage of economic opportunity. Increasing the accessibility of affordable mass transit, including rolling stock, is one way to begin to address some of these complex issues. Expansion of mass transit systems also helps reduce the trafc gridlock that grips cities large and small around the world, while optimizing the use of gasoline and lowering carbon emissions.

AUTOMOTIVE COMPONENTS: EMERGING CLUSTERS IN EMERGING MARKETS

Automotive components companies are nding tremendous potential in emerging market countries. Nations like Brazil, China, India, and Russia, feature strong manufacturing traditions, a comparatively low-cost labor force, growing consumer demand, and geographic proximity to their customers and each has become an emerging cluster of automotive manufacturers. The expansion of the industry offers strong economic and development opportunities.

Marcopolo: Comfortable, affordable transportation for more people

Based in Caxias do Sul, Brazil, Marcopolo is among the largest bus body producers in the world. The publicly traded company partners with industry leader Mercedes-Benz Mexico through its Polomex subsidiary to assemble and sell buses in Mexico. Marcopolo also operates plants in Argentina, Brazil, Colombia, Portugal, and South Africa, employing 8,000 skilled workers around the world. IFC committed $38 million to support the parent company and its expansion into Mexico for this internationally competitive technology leader in bus production, making affordable transportation accessible to more people in emerging market countries.

Recent IFC investments in these booming markets include: ZMZ Bearings, Russia:
2007 project to support Daido Metals entry into Russia through the acquisition of ZMZ Bearings, a leading local manufacturer of half bearings for automotive engines. IFC is providing a $5 million loan.

Launch Tech, China:

IFC equity investment in Launch Tech in 2005 helped consolidate the companys multiple leased facilities for its administration, manufacturing, and R&D functions into a large complex in a Shenzhen technology park. Launch Techs products include automotive diagnostic equipment, lifts, and wheel aligners and balancers.

IFCS role:
$38 million in long-term nancing for working capital needs and equipment upgrades Advice on a more sustainable nancing structure and better nancial management Advice on industry best practices from around the world

INVESTING IN TRANSPORT IN EMERGING MARKETS

Sabo: Flexible nancing in support of investment program to compete in the global market
Sabo is a midsize, family-owned automotive supplier based in Brazil, with operations around the globe. The company produces oil seals, gaskets, and hoses that are sold directly to the major equipment manufacturers and to other automotive component producers. While it expands to meet growing demand, the recent liquidity improvements in the Brazilian market have not beneted midsize suppliers like Sabo, for whom nancing options tend to have shorter tenors and carry more restrictions. IFC provided longer-term nancing that the company could not otherwise obtain, thus giving it a stable funding platform to support rapid growth in an uncertain and highly competitive business environment. With Sabo being a key player in the auto parts sectoran important contributor to the countrys economyits success and continued growth will generate development impact by contributing to the countrys GDP and increasing export revenue, technological and management know how, and training and employment. These benets will extend from Brazil into other emerging markets as the company expands its operations globally.

IFCs role:
Providing $40 million in long-term nancing that allows the company to manage its nances prudently Long-term partnership includes guidance on improving corporate governance, environmental and social practices, and assistance in broadening Sabos nancing sources Support for new cross-border investments

TBK: Environmentally-friendly supplier for Chinas surging automotive industry

A joint venture between Japan-based brake manufacturer Tokyo Buhin Kogkyo Co., Ltd, and Changchun Shili Automobile Brake Parts, a Chinese producer of brake friction materials, is leading to the introduction of high-quality, asbestos-free linings for drum brakes and pads for disk brakes in commercial vehicles produced in China. The JV (joint venture) companys primary customer is First Automotive Work Group, the largest vehicle manufacturer in China, which produces close to 1 million passenger cars and commercial vehicles a year. IFCs loan supported construction of a new manufacturing facility in Changchun, Jilin Province. The new plant incorporates advanced technologies to improve the quality of essential components, and introduces greener industrial practices.

IFCs role:
Originally committed $4 million in nancing toward an $11 million construction project. However, due to the depressed market condition, the total project cost was reduced to $8 million. IFC disbursed $2 million in 2006 Support for technology transfer from an innovative Japanese company to China, helping improve the environmental prole and safety of commercial vehicles

TWO-WHEELERS: AFFORDABLE TRANSPORTATION

As living standards improve in emerging market countries, there is a growing consumer demand for personal transportation. Two-wheelers offer a more affordable alternative for consumers who cannot afford to buy a car. IFC supports companies that produce such alternative transportation due to their potential positive impact: enabling transportation and increasing access to education, health care services, and jobs. Whenever possible, IFC also supports zero-emissions technologies, such as electric bicycles and scooters.

PT TVSM: More two-wheelers for Indonesia

IFCs investment in PT TVS Motor Companys new manufacturing plant in Karawang, Indonesia, will allow the company to produce 300,000 motorcycles a year to meet growing domestic demand, which topped 4.5 million in 2006. Although the current two-wheeler market in Indonesia is highly competitive, the country has the third-largest market in the world after China and India, but still a low per capita ownership. Project sponsor, TVS Motor, is a member of the TVS group, a leading supplier of automotive components. TVS Motor, manufactures and sells two-wheelers, employs 5,800 staff, has strong in-house research and development capabilities, and a deep supplier base, as well as a wide dealer network, with more than 2,500 retail outlets in India. The new manufacturing plant is expected to create 500 new jobs in Indonesia. Future plans include developing a local supplier base and expanding dealer network in Indonesia.

IFCs role:
$20 million in long-term nancing Partnership boosts the sponsors condence and comfort level, given IFCs strong local presence in the market and relationships with the government, nancial institutions, and private industry Support for cross-border investment: this is the rst expansion for the sponsor based in one emerging country, as it moves into another emerging country

INVESTING IN TRANSPORT IN EMERGING MARKETS

AEROSPACE: THE NEW FRONTIER

Globalization has contributed to the development of basic manufacturing industries in emerging markets. Now, the focus is on increasing skill levels and technological know-how so that developing countries can gain a share of value-added industries, such as aerospace engineering and production. This effort includes providing enough opportunities to keep highly educated workers at home. IFC is supporting the establishment of a more sophisticated engineering and manufacturing base, which will create more reasons for skilled workers to remain in their home countries.

GREEN TRANSPORTATION: INVESTMENT IN THE FUTURE

In 2004 transportation in general contributed to 13 percent of global greenhouse gas emissions. As a world leader in sustainability, IFC invests in innovative projects including those with potential to revolutionize the entire concept of energy efciency and clean transportation. As momentum builds for such new products, IFCs investments are helping forward-thinking companies turn great ideas into marketable products.

Embraer: Aircraft manufacturing in Brazil

Embraer is the worlds fourth-largest aircraft manufacturer and the only one based in an emerging economy. The company recently introduced a new generation passenger plane, with the help of IFCs long-term nancing. Even before the rst plane rolled off the production line, the company had numerous orders from airlines and leasing companies from around the world. The company employs more than 14,500 people, helping reverse the brain drain of highly skilled workers from the country. As a member of Brazils prestigious BOVESPA Corporate Sustainability Index, Embraer also demonstrates the business case for sustainability: that the drive for prot, environmental stewardship, social responsibility, and corporate governance can all align to achieve a strong triple bottom line.

Electrotherm, India: Technology transfer for energy efcient, clean personal transport.
Electrotherm produces electric scooters for consumers in India who want a clean, inexpensive, and reliable means of transport that is also compact and easy to maneuver through the countrys crowded streets. Electrotherm has developed the electric two-wheeler, using some of its core technology and competence in power electronics acquired and perfected from its induction furnace business. The new vehicle is compatible with the harsh Indian climate, comes into two prime categories of speeds up to 25 kilometers an hour and 45 kilometers an hour, and costs about $600-$1,000. Future plans include three-wheeled models and hybrid buses to increase access to clean mass transit. IFCs $25 million investment is helping the company expand its production and enhance its competitiveness and energy efciency.

IFCs role:
$25 million in long-term nancing and quasi-equity Project helps reduce greenhouse gas emissions and enhances energy efciency

IFCs role:
Long-term nancing at a time when access to nancing sources was limited, given the risks ascribed to lengthy product development cycles in the aerospace industry and the sovereign risks associated with an emerging market country

OUR APPROACH
IFC seeks to partner with strong, stable rms that have an understanding of local, regional, and global markets, a good track record of success; and an abiding commitment to transparent corporate governance, social responsibility, and environmental sustainability.

We look for:
Fast growing manufacturing companies Investments in industrial restructuring, including privatizations Foreign Direct Investments, including cross border opportunities Investments in technology development and dissemination that reduce impact on climate change Companies of vehicle related service networks including SMEs

INVESTING IN TRANSPORT IN EMERGING MARKETS

AUTOMOTIVE INDUSTRY: PROCESS INNOVATION AND ENVIRONMENTAL LEADERSHIP In an industry characterized by increasing competition, margin pressure, and regulatory and environmental requirements, automotive companies are , of necessity, leaders in product and process innovations. Such innovations enhance the competitive marketplace and lead to higher productivity and economic growth. IFC projects seek to maximize the use of best industry and environmental practices, enabling our clients to compete successfully and contribute to long-term domestic and global sector growth.
One such project, with Turkish automotive industry leader Standard Prol is supporting innovation, while facilitating expansion of the automotive supplier industry in an emerging market country. Headquartered in Istanbul, the company is Turkeys largest manufacturer of automotive sealing systems with plants located in Bulgaria as well as in Turkey. IFCs equity and loan nancing is helping Standard Prol enhance its research and development capabilities, allowing the company to focus on developing new generation sealing systems using alternative, nonconductive, and nitrosamine-safe compounds. The successful, award-winning company has elevated its environmental focus and innovation to the strategic level, demonstrating a strong business case for sustainability.

IFCS TRANSPORTATION EQUIPMENT PORTFOLIO As of July 31, 2007, IFCs commitments in the transportation equipment sector totalled $324 million, with 90 percent in the automotive industry. IFCs main automotive investment destinations include Brazil, China, India, Mexico, Russia, and Turkey.
For more information about IFC and our transportation equipment investments, please contact: Sabine Schlorke 1-202-458-5480 or sschlorke@ifc.org Emmanuel Pouliquen 1-202-473-9114 or epouliquen@ifc.org Diogo Castro e Silva 1- 202-458-1811 or dcastroesilva@ifc.org

Printed on material that meets international environmental standards and is from sustainably managed commercial forests.

2007 INTERNATIONAL FINANCE CORPORATION 2121 Pennsylvania Avenue, N.W. Washington, D.C. 20433 U.S.A. Telephone: 202 473-1000 Facsimile: 202 974-4384 Internet: www.ifc.org